Correlation Between IShares Semiconductor and ARK Fintech

Can any of the company-specific risk be diversified away by investing in both IShares Semiconductor and ARK Fintech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Semiconductor and ARK Fintech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Semiconductor ETF and ARK Fintech Innovation, you can compare the effects of market volatilities on IShares Semiconductor and ARK Fintech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Semiconductor with a short position of ARK Fintech. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Semiconductor and ARK Fintech.

Diversification Opportunities for IShares Semiconductor and ARK Fintech

-0.68

Correlation Coefficient

IShares Semiconductor  ARK Fintech

Excellent diversification

The 3 months correlation between IShares and ARK is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and ARK Fintech Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK Fintech Innovation and IShares Semiconductor is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Semiconductor ETF are associated (or correlated) with ARK Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK Fintech Innovation has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and ARK Fintech go up and down completely randomly.

Pair Corralation between IShares Semiconductor and ARK Fintech

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the ARK Fintech. But the etf apears to be less risky and, when comparing its historical volatility, iShares Semiconductor ETF is 1.1 times less risky than ARK Fintech. The etf trades about -0.03 of its potential returns per unit of risk. The ARK Fintech Innovation is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,966  in ARK Fintech Innovation on September 22, 2024 and sell it today you would earn a total of  887.00  from holding ARK Fintech Innovation or generate 29.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares Semiconductor ETF  vs.  ARK Fintech Innovation

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ARK Fintech Innovation

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Fintech Innovation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, ARK Fintech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and ARK Fintech

The main advantage of trading using opposite IShares Semiconductor and ARK Fintech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Semiconductor position performs unexpectedly, ARK Fintech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ARK Fintech will offset losses from the drop in ARK Fintech's long position.

The idea behind iShares Semiconductor ETF and ARK Fintech Innovation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.